Entertainment Australian promoters call for Government insurance scheme to get music festivals going during coronavirus

00:17  21 october  2020
00:17  21 october  2020 Source:   abc.net.au

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As the coronavirus continues to spread, live event organizers have been canceling or "Thank you for your patience during these uncertain times. After careful consideration and extensive coordination with local and state authorities, we Shambhala Music Festival 2020 will not happen due to coronavirus .

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a group of people on a stage: Bluesfest is one of the major Australian music festivals that is in limbo due to insurance. (Dave Kan) © Provided by ABC Business Bluesfest is one of the major Australian music festivals that is in limbo due to insurance. (Dave Kan)

After a swathe of cancelled music festivals, major promoters are pledging to get Australian punters back partying in 2021.

But even if social gathering rules permit, there is a hidden sticking point that could stop the fun: insurance.

"It's a huge risk," Bluesfest director Peter Noble said.

Mr Noble's iconic Byron Bay music festival was just weeks away from hosting the likes of Patti Smith onstage when COVID-19 social distancing measures hit in March. All major events globally were stopped in their tracks.

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Many UK music festivals are not insured for communicable diseases, and are nervously waiting to see how far coronavirus spreads. Worse still, most festivals will not have the correct insurance to cover their expenditure and projected losses if the government or local councils order them to cancel.

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By the time of its last-minute cancellation, Mr Noble said Bluesfest had pumped about $10 million into marketing, artist deposits, flights and accommodation, booked suppliers, and sold tickets to 30,000 fans.

Like most major events, Bluesfest had cancellation insurance. And Mr Noble said when the company bought its policy more than five years ago, it had paid a higher premium for a now-important extra.

"We actually ticked the communicable disease box," Mr Noble said.

"What in particular caused us to tick that box (was) that there was a outbreak of gastro in the Byron Bay area at the time that we'd bought the policy, and our medical officers had advised it.

"As it turned out, it was a godsend for us.

"All it meant was our ticket buyers were insured. It didn't cover our profit or creditors. It covered that our ticket buyers would get their money back."

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Most other Australian festival promoters have not been that lucky.

Youth festival Groovin the Moo was just six weeks away from taking acts such as Dope Lemon and San Cisco to six regional Australian cities, when the pandemic stopped the world.

The Moo's policy did not include communicable diseases.

"Virtually everything was gone overnight," Groovin The Moo promoter Kathryn Holloway told ABC News.

"There was a huge financial loss and emotional loss.

"In terms of finances, there was all the costs that are sunk that you can't recoup. Deposits to suppliers. Deposits to artists. Payments to insurance. Six weeks out you're in the process of locking in finer details and putting icing on the cake.

"We were able to recover some of the deposits, as we have great working relationships with suppliers. But in order to ease our financial loss, those suppliers also had a financial loss.

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"By the time we refunded tickets to patrons as well, the losses were substantial."

What is happening with insurance post-COVID?

Major events cancellation insurance was already a fraught area of indemnity before the pandemic.

Some festivals held during summer months were struggling to pay extra premiums to cover for bushfires.

Ian Stack is one of the few brokers in Australia to specialise in major events and festival cancellation insurance.

He confirmed that before COVID-19, it was possible to get cancellation policies with "communicable disease" coverage.

"It was something you could buy out for an extra premium," he said.

"It wasn't to do with a pandemic, it was for things like an outbreak of gastro in a camping grounds.

"However, inadvertently if [a promoter] had that in place before COVID-19 became a known event, they'd have been insured for it."

Mr Stack only remembers a few clients opting for it in the pre-pandemic period because of the additional cost in an industry that is already run on slim margins and profits.

"It just wasn't on the event promoters' radar. Nobody saw this pandemic coming," Mr Stack said.

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"Where promoters could save money, they'd avoid that extension. Now it's come back to bite them.

"Unfortunately now that COVID-19 is a known risk, all the insurance companies are actually excluding communicable disease and not allowing it to be bought out.

"It's virtually impossible at the moment to get cover for that risk."

Insurance Council of Australia spokesman Campbell Fuller confirmed insurance for pandemics was already largely regarded by the industry as uninsurable after the SARS outbreak more than a decade ago.

He said event cancellation policies used to be covered, but now that has changed.

"Insurers that previously provided limited diseases coverage to event organisers have recently begun to change policies to exclude pandemics and other infectious diseases," Mr Campbell said.

"This brings them in line with other forms of insurance and the requirements of global reinsurers."

Why are the insurers doing this and where does this leave major events?

ABC News approached major insurance companies including Lloyd's, Allianz and Chubb, but all declined to comment.

Lloyd's projects the global insurance market will spend US$100 billion ($142 billion) on COVID-19 payouts.

As a broker, Ian Stack sees the perspective of insurers not wanting to be liable to further losses as the pandemic drags on.

Australian promoters call for Government insurance scheme to get music festivals going during coronavirus

  Australian promoters call for Government insurance scheme to get music festivals going during coronavirus After a swathe of cancelled music festivals, promoters are pledging to get Australian punters back partying in 2021. But difficulty in getting insurance coverage may stop them.But even if social gathering rules permit, there is a hidden sticking point that could stop the fun: insurance.

"They're a business like any other, they need to make a profit," he said.

But Mr Stack feels for his clients and the predicament this leaves them in.

"If the promoters are going to run events, they'll have to look at non-insurance ways to protect their exposure," he said.

"You'll find a lot of promoters at the moment, if they had plans for events in 2021, they are second guessing themselves at the moment."

Bluesfest and Groovin the Moo are both hoping to hold their festivals in April 2021.

Yet their organisers are acutely aware that the risk of investing in them is mounting as COVID-19 continues and second waves, such as that just seen in Victoria, continue to make planning difficult.

"It there's a cluster in your area and you're closed down immediately prior to your event and you can't get insurance, how do you deal with that?" Bluesfest's Mr Noble said.

"Nobody wants to spend $10 million to find that on the day they can't open their gates. We've all been through that once. We don't want to go through it twice."

Some promoters are trying to change their business models to put down the least amount of money possible before the events go ahead.

Smaller events may have more capacity to do this.

Earth Frequency promoter Paul Abad is hoping to hold his 5,000-person camping music festival outside Brisbane in February.

It is unclear if or the local council will even permit this by then, but, just in case, Mr Abad is planning for revellers while trying to make his business model as nimble as possible.

That has already taken some goodwill. Mr Abad has negotiated with his venue to only pay a deposit four weeks in advance. Artists are also not taking deposits before performing.

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"It is about spending the least money to still build a viable event, to be ready to do an event when things are right, but not make a bunch of bad decisions and excessive expenditure based on false confidence," Mr Abad said.

What would an insurance bailout look like?

Groovin The Moo's Ms Holloway agrees that the industry will have to change its business model post-COVID-19.

However, she is one of many promoters who think a bigger-picture solution is needed to bring confidence back to a wounded industry.

"Even if we can get a line-up together that is Australian only, and borders open up and crowd gathering rules permit, there is still the issue of insurance," Ms Holloway said.

"Premiums will go up. We're aware of that. And insurance companies won't have COVID-19 or communicable disease as part of their policies. That means there's a gap and no safety net for the promoter."

While music festivals may have a reputation as parties, Ms Holloway said helping the industry was also about supporting employment.

Data given to ABC News by the Australian Festival Association shows music festivals pulled $2.7 billion into the Australian economy every year pre-COVID, and created almost 10,000 jobs.

"We could suffer a massive loss and even more jobs will be lost — that would be completely catastrophic," Ms Holloway said.

"The government needs to step in and provide us with an interruption fund."

Insurance broker Ian Stack also believes this is the only solution. He said it could be a large pool of money for promoters to access if their event is cancelled at the last minute due to the pandemic.

The Federal Government has already done this for some of Australia's film industry. The .

Mr Stack said there was also another major precedent. After September 11, when insurers stopped covering commercial property for terrorist events, John Howard's government set up the Australian Reinsurance Pool Corporation.

In a statement, Arts Minister Paul Fletcher said music festivals and other major events could apply for grants.

The Government is providing $75 million through the Restart Investment to Sustain and Expand (RISE) Fund.

Music festivals and other major events are able to apply for grants of between $75,000 and $2 million under this scheme to support eligible activities.

Mr Fletcher did not comment on industry calls for an insurance solution.

Ms Holloway said she hoped both state and federal governments would step in with help.

"It feels to date that neither the state or federal governments have paid as much attention to support the entertainment industry as they have for the sport or film industry," she said.

"It's really hard to function under all the stress."

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